What’s inside:

  • U.S. markets re-open after holiday to finish out the week
  • S&P 500 poised to remain firm and close the year near or at the highs
  • Looking for a good risk/reward opportunity to join aboard

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Yesterday, the U.S. was closed (Japan, too) for the Thanksgiving holiday, with markets reopening today to conclude the week. But there is almost certain to be a large number of empty seats on the desks as traders look to take advantage of a long weekend. This sets up for illiquid trading conditions and, barring any unforeseen headlines of significance, a lack of volatility.

Overall, stocks continue to move to higher ground and it looks unlikely at this juncture in the year we will see a meaningful decline develop, only perhaps shallow pullbacks. This doesn’t mean it’s a time for complacency, but it also means we need to temper our expectations for a rising volatility environment in the event the market starts to experience minor weakness. Falling stocks tend to wrestle up excitement as volatility heightens, and I’ve never met a trader who doesn’t like volatility (unless of course they are short volatility).

Ideally, we get a little consolidation period or minor dip for an opportunity to jump aboard a late, late-year rally, or ‘Santa Claus’ rally, with Christmas just around the corner. Perhaps the market will be kind enough to present a low/risk opportunity to establish long positions for higher prices, or perhaps it won’t and choppy conditions will continue to prevail. Watch how the market responds to the trend-line off the August low should we see a dip to that point.

While the S&P 500 looks poised to close at or very near record highs when the year is finally in the books, we are approaching a potentially pivotal spot as 2018 quickly approaches. It was touched on in yesterday’s ‘big-picture’ technical outlook, but should we rise up into the 2625/50 vicinity price action could become interesting. For more on this, check out yesterday’s piece.

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S&P 500: Daily

S&P 500 Technical Outlook: ‘Dip-trip’ Buyers Waiting

---Written by Paul Robinson, Market Analyst

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You can follow Paul on Twitter at @PaulRobinonFX.